Focus on bond and stock valuation problems

 

 

In this assessment, the emphasis is on calculating the value of bonds and stocks. You will learn about the common features of bonds and learn to differentiate among the types of bonds. The focus then shifts to the mathematics of bond valuation (bond valuation model using the TVM concept). You will also learn about the factors that affect a bond’s price and the relationship between changes in interest rates and bond prices.
In addition to learning about bonds, explore the various components of stock returns, common stock valuation models (such as constant dividend growth and variable growth), the use of the price/earnings (P/E) ratio, and preferred stocks valuation.
Introduction
This assessment focuses on the TVM concept and how it relates to bond and stock valuations.
Instructions
Complete and submit the Assessment 3 Template [XLSX].
Competencies Measured
By successfully completing this assessment, you will demonstrate your proficiency in the course competencies through the following assessment scoring guide criteria:
Competency 1: Analyze financial environments and concepts.
Explain what a call provision (call feature) allows (bond) issuers to do.
Explain why the S&P 500 Index might be a better measure of stock market performance than the Dow Jones Industrial Average.
Competency 2: Apply financial computations and processes.
Calculate five bond valuation problems correctly.
Calculate five stock valuation problems correctly.
Competency 3: Communicate effectively and professionally.
Convey clear meaning through appropriate word choice and usage.

Sample Solution

Stocks and bonds each have their own set of benefits and drawbacks. Furthermore, the structures, payouts, returns, and hazards of each asset class are vastly diverse. Understanding the differences between these two asset types is critical to developing a strong investment portfolio that will last over time. Asset allocation mixtures are, of course, unique to each investor, and are determined by their age, risk tolerance, and long-term investment and retirement goals. Stocks are ownership holdings in publicly traded firms that allow investors to participate in the growth of the company. However, these assets have the potential to lose value, and they could even go to zero.

model particularly regarding leader-member relations, if the group are familiar and trusting of the leader policy implementation becomes much simpler. Similarly to leadership, understanding and adapting to the situation is key to a leader being able to implement policies that ensure a group work as a team. Teamwork is a product of good leadership, and is again the responsibility of the leader to ensure the group are working successfully together. Highly functioning teams are essential within organisations to increase productivity and member satisfaction, by utilising the talents of all group members effectively within the constraints of the task, personal relationships and the group goals (Pettinger, 2007).
Figure 2: Tuckman’s Model of Group Development (Agile Scrum Guide, 2019)
Tuckman in his Model of Group Development provides easily identifiable stages that a groups performance can be measured against, making it useful for monitoring performance, Figure 2 shows Tuckman’s model. Ranking group performance against this scale can provide leaders with a clear understanding of how the group are functioning, allowing them to implement policies to change this if performance is unsatisfactory (Pettinger, 2007). Within organisations, the theory can be loosely applied to creating teams by grouping familiar individuals with the aim that they will reach the norming and performing stage of the model quicker. For short and simple tasks this is an extremely effective way of organising groups, due to the increased short term productivity. However there are significant issues with grouping individuals in this manner, particularly when tasks become more complex, and ultimately the model should mainly be used for monitoring the progress of groups (Pettinger, 2007).
Figure 3: Belbin’s Team Roles (PrePearl Training Development, 2019)
A more functional approach of grouping individuals is to utilise Belbin’s Team Theory (Belbin, 2017). Belbin identifies 9 key roles that must be fulfilled within a group to ensure success, the roles are summarised in Figure 3. The roles cover a wide spectrum of skills that need to be present within a group to ensure success, and becomes essential when tasks are lengthy and complex. Organisations can find the Belbin roles each individual fits through a questionnaire, and thus balanced groups can be formed covering all the

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